Tag: Games Industry

  • Larian’s unfair advantage

    Larian’s unfair advantage

    This post was inspired by two things I saw recently:

    • Jonny Price of WeFunder, sharing their newly designed raise page, featuring some giants of tech like Substack, Mercury and Levels.
    • Xalavier Nelson Jr. of Strange Scaffold, commenting on the seemingly extreme success of Larian Studios, with the upcoming release of Baldur’s Gate, and imporing consumers that it not “raise the standard”.

    The connection between these two items is not obvious, but it is interesting.

    The lemon problem

    WeFunder, for the uninitiated, is a crowdfunding platform for (primarily) technology companies. It allows community-oriented startups to sell a small % of ownership to their users and supporters.

    Unfortunately, crowdfunding faces a stigma which some refer to as ‘the lemon problem’. Essentially, “why are you raising from unsophisticated retail investors when you could get backing from a top tier venture capital firm?”

    This signalling issue then discourages the best startups from pursuing crowdfunding, which (in theory) lowers the overall quality available there, reenforcing that crowdfunding is a negative signal.

    The problem with that concept is that it is dumb, and built on a decade of putting venture capital on a pedestal.1

    Crowdfunding, or ‘community rounds’ as Jonny would prefer, offers a path for users and supporters to become advocates with ownership and incentives aligned with your own. You can offer them perks, you can treat them as your Customer Advisory Board, and you can usually rely on them to help disseminate your message.

    Unfair advantages

    So where does this connect with Xalavier, and Larian?

    We’ll begin at the end, with Xalavier’s comment:

    Like a lot of people, I’m deeply excited about what the lovely folks at Larian accomplished with Baldur’s Gate 3, but I want to gently, pre-emptively push back against players taking that excitement and using it to apply criticism or a “raised standard” to RPGs going forward.

    Xalavier Nelson Jr. on the expectations set by Baldur’s Gate 3

    He goes on to cite a number of reasons why Larian has been advantaged in the development of Baldur’s Gate. Particularly, their experience with this style of game, and the importance of the IP they have secured from Wizards of the Coast.

    He’s right on all counts. Larian is – today – in an unparalleled position as a developer of RPG games. They have great experience, multiple studios, a supportive community, and a huge IP.

    You could, if you were a peer of Larian’s, a fellow game developer, feel a bit like they are operating in a league above you. That there’s an unfair advantage, and any comparison between their work and yours would be unfair. Punching down.

    Unfortunately, Xalavier stopped there. He didn’t finish the thought. He never asked why Larian has this advantage, to determine whether or not it is unfair.

    Kickstarting a dream

    Back in 2013, Larian was a relatively small games studio. They did ‘mercenary’ work for other studios to help pay their bills while developing their own string of medium-budget RPG titles.

    Their work was quality, but they couldn’t compete in the big leagues. Studios like Bethesda, Obsidian and Bioware were effectively household names, and threw resources into pushing the envelope of what RPGs were offering.2

    Larian were ambitious, though. Swen Vincke, the studio head, had been an RPG fanatic all the way back to Ultima 7, and he wasn’t done trying to carve a path in the genre. As they began developing their next title, Divinity: Original Sin, they ran into a problem: it was more game than they could afford to make, but they couldn’t afford to make any less. They needed a break.

    Funding for games is notoriously difficult. All of the costs come before you make a penny in revenue, and there are usually few indications that you’ve made something players want until release. Many games flop, and many studios fold. It’s not an attractive area for institutional investors. So Larian turned elsewhere, to their community, and the wider community of RPG fans.

    In 2013 they launched a Kickstarter campaign for Divinity: Original Sin. They aimed to raise between $400,000 and $1,000,000 to support development, by offering everything from ‘gratitude’ to an invitation to the launch party depending on how much was contributed. They clearly laid out what each benchmark in funding would mean for the game, and the player’s experience.

    They didn’t quite hit the $1,000,000 mark, but they did raise $944,282 from close to 20,000 individuals. An average contribution of almost $50 each, from a vast but not cash-rich audience, into the dream of a great RPG.

    It gave Larian the cash they needed to get Divinity: Original Sin out of the door, and it was everything they had hoped for: a landmark RPG which put the studio on the map, and laid the groundwork for everything they would do in future. Ultimately, their work inspired sufficient confidence from Wizards of the Coast to give Larian the rights to develop the Baldur’s Gate franchise with this hotly anticipated sequel.

    Community driven growth

    Over the next few years, covering the eventual launch of Divinity: Original Sin in 2015, the even-more-succesful sequel in 2017, and up until the imminent release of Baldur’s Gate 3 today, Larian has experienced the benfit of that crowdfunding round.

    More than any other factor, raising money from an audience of customers (and potential future customers) has meant that Larian has never had to compromise. They were not at the mercy of institutional investors or publishers to hit hasty development milestones or add supplementary revenue streams. They could build the game as they wished, by a group of RPG enthusiasts; for an audience of RPG enthusiasts. They are self-sufficient, and happily so.

    We’d tried multiple times with third parties and we listened to them every single time, and we had to learn that it was important that we took our own fate in our own hands. And since then, things have been going on the upside for us.

    Swen Vincke on developing Divinity: Original Sin

    This alignment of incentives between product and customer is fundamental. It’s how companies should work at the best of times, but the need for external capital can often complicate the relationship. Larian went right to the source.

    And that is their ‘unfair advantage’, that they were able to focus entirely on their vision to build a fantastic product.3 Exactly as every company should, in theory.

    Equity in the equation

    Larian’s crowdfunding success was built purely on the promise of what their product could offer to customers, and how additional capital would strengthen that proposition.

    In the world of startup financing, equity crowdfunding takes this concept and injects it with steroids. Revolut’s crowdfunding round in 2016 has since created more than 100 millionaires, and the company has attracted more than 4,000 retail investors to date.

    These may not necessarily all be users of Revolut, but they are individuals who believe in the future of the company, will recommend it to others, and will contribute to the future growth of the company.

    This is why I’ve long been enthusiastic about crowdfunding as a source of capital for startups. And while that includes the obvious consumer companies with network effects and tangible investor perks, it also includes many successful raises from business-facing deeptech companies who are producing radical innovation.4

    Be like Larian. Make community your unfair advantage.

    1. How is that going, by the way? [↩]
    2. And each had, in their own way, at a previous point in time, earned that place in the ‘big leages’. [↩]
    3. It has also allowed them, more recently, to build this supportive community into their development pipeline. Early access for Baldur鈥檚 Gate 3 will have lasted for an unprecedented three years before official release, during which time they have relied on that community for feedback and vital testing capacity. [↩]
    4. Why VCs are failing that sector is another subject, but if you’ve read many of my recent articles you may be able to piece that together yourself. [↩]
  • Generative AI and the Games Industry

    Generative AI and the Games Industry

    This post looks at applications of generative AI in the context of the games industry, but much of the same logic can be applied elsewhere.

    Adapting to technological evolution

    With every new technology revolution – web3 most recently, and now AI – there follows a large herd of true believers. It can do all things, solve all ills, and life will never again be the same again. Enamoured by possibility, they follow with a true sense of opportunity.

    Loudest amongst this herd (and most critical of nay-sayers) are the wolves in sheeps’ clothing. The rent-seeking charlatans.

    This was explicit in the get-rich-quick era of web3, and much of the same problem has transferred over the AI as techno-pilgrims flee one sinking ship to pile into another.

    Secondly, on the other side of the coin, are the cynics. People who were raised on 56k modems and bulletin boards, who feel a deep discomfort as technology moves beyond their grasp. They felt like the rational resistance to web3, and so have little hesitation about weighing in on AI.

    We have to be conscious of both groups, and our own place on that spectrum.

    Why the games industry?

    There are three main reasons I’m keen to address the games industry as the case-study for this post:

    1. As with web3, AI is being shoved down people’s throats without due concern for why.
    2. It is largely focused on a young audience who are absent from these conversations.
    3. It connects with my personal experience in the games industry.

    If you want to read about the potential use cases for AI in banking, you’ll find a thousand thought-leader think-pieces. It was well-covered ground without much original thought even before ChatGPT came along.

    If you want to talk about the potential use cases of AI in the games industry, you’ll find some ex-crypto VCs and technologists trying desperately to pivot their brief experience. Insubstantial waffle.

    Perfection is the enemy of good

    Dealing with the more exciteable technophiles, you’ll probably notice they don’t show a lot of interest in the complex applications. Their interest is in the most extreme examples of movies, games or books being entirely generated by AI (or entirely decentralized, yada yada).

    Their point is simple: if AI can do these things crudely today, then tomorrow it will be able to do them well – and at that point we’ll be forced to embrace the bold new future. Right?

    This fallacy can be observed in every parent watching their child smear paint on paper for the first time: something inside them says ‘they could be a great artist’. It’s true: the ability to manifest art can be that simple, and the child has huge potential for improvement… Yet it’s still not going to happen for all but a miniscule few.

    In both cases, the AI model and the child, there cannot merely be push, there must also be pull. There must be a need being met. An appetite being satisfied. And 99% of the time, there isn’t. Once the novelty has worn off, nobody has any interest in watching an AI-generated movie, reading an AI-generated novel, playing an AI-generated game, or looking at your child’s paintings. There just isn’t a call for it.

    Instead of putting AI on the pedestal of a godlike creator, we should look at where it can be a tool to solve a problem.

    Merchants of fun

    You can get side-tracked in talking about experiences, socailising, adventuring, exploration, curiosity, challenge, status… Ultimately, games are vehicles for fun. That’s bedrock.

    Is an AI-generated game likely to be more fun than the alternative? No, of course not, and if you suspect otherwise then you’ve not spent enough time with the wonderful and wacky people who make games. They are true creatives.1

    Any application of generative AI to the games industry must have either enhance fun, or enhance the developers ability to deliver it.

    Exploration

    If you look at games like Minecraft or 7 Days to Die where you can explore a proceedurally generated world, it’s easy to see how generative AI might be able to supercharge that environment building.

    It’s worth considering, though, that this is a specific approach for a specific type of game. As good as these engines have gotten, most of the time games will require a more ‘designed’ world, with geography or features which play into gameplay mechanics, story elements or IP. Generative AI may offer tools to make this more efficient (as many proceedural tools already do), but is unlikely to replace it entirely.

    Socialization

    Imagine walking around a Skyrim or Cyberpunk style sandbox-world, full of NPC characters with their own unique look, voice, and personality. Each able to hold a conversation with you, flavoured with their own specific personality and knowledge. Not merely giving canned responses to pre-defined prompts, but able to interact fluidly with you and amongst themselves.

    Again, this is unlikely to ever be all a game needs. Stories still require specifcally designed characters with particular roles which need to be shaped by the intention of writers and a design team, but it is still a tremendous opportunity to solve the social component of virtual worlds.

    These are two quickly-sketched examples of how generative AI could enable a leap forward in the experience provided by games devleopers – and I am sure there are many more to be found.2

    Tapping into the market

    I wanted to do this in a more subtle manner, but it’s just more practical to break down Andrew Chen’s Twitter thread:

    Games can take 3+ years to build, and technology adoption happens at specific windows of time

    If your generative AI tool is a plugin (for the Unreal Engine, for example) then a studio can pick it up at any time and add it to their development stack.3

    You shouldn’t be limited to thinking in terms of ideas that are ‘disruptive’ to how games are made, and indeed most of the opportunity may be in ideas which are complimentary.

    indie games make little $. There’s only a few scaled players, who will always push on pricing

    If you were going to target indie developers it would have to be with a very specific value proposition and business model (e.g. Unity in 2004). There’s no reason to worry about this otherwise; there are enough larger studios.

    the games ecosystem is insular, with its own conferences, luminaries, and networks / networking” in the games industry often involves, well, gaming. Are you good at Valorant? 馃檪

    Can you tell me an industry which doesn’t have its own conferences, luminaries and networks?

    The games industry is not insular, and it is comical to characterize it as a bunch of nerds playing games together. It’s a wonderfully open, social and diverse community.4

    a large % of game cos have artists and creative people. Many are threatened by, and oppose, AI tech

    I don’t know of anyone in the games industry, artist or designer, who isn’t starry-eyed at the possibilities of what AI can enable.

    They are also familiar enough with how games work to recognise that human input is always going to be required to shape and polish the human experience which emerges on the other side.

    you need to generate editable, riggable, high-quality art assets. Right now assets are idiosyncratic and hard to edit

    Generative AI has not yet proven that it can generate useable assets, never mind well-optimised thematic assets. That problem can probably be solved, but to what end?

    Will a world created by a generative AI ever truly feel interesting, coherent, beautiful? Maybe there are better things for it to do?

    large publishers often provide tech to their internal studios. They’ll partner to learn about AI, but will try to build in-house. Is your tech defensible?

    That might have been the case 15 years ago, but the vast improvement in game engines and tools has meant that developers are much more likely to build on existing platforms.

    If a publisher believes that a tool would make development cheaper and faster then they’ll support it without blinking.

    large gaming cos care a lot about their models and data not being shared across the industry. How do you guarantee that? / they also care that their models are trained on data that’s safe from a copyright perspective. There’s lots of hoops to jump through

    Stretching a bit here, but: You train your tools on an open set of data to the point where they are useable, and allow developers to provide additional training based on data from their own IP. In that scenario there is no reason for crossover between studios.

    It’s unlikely that training from one game would ever be useful to the application of the AI in another. It is probably more likely to produce undesirable results.

    Conclusion

    Some years ago an associate of mine went to interview for a job at a games company in Seattle. The interviewer had previously been the lead designer on Starcraft, and naturally expected the candidate to play a match against him while fielding questions about the role.

    The games industry is full of these amusing anecdotes of quirky behavior, and there is a pronounced culture associated with that. However, it is condescending to think that culture stands in the way of progress, or that games studios can’t engage with business and technology partners in a perfectly competent manner.

    If you make a useful tool which solves a problem for the games industry, you will be able to access the right people to make a sale. I’d go so far as to say it’s probably easier and faster moving than many other industries.

    If that is your aim, make sure you are spending enough time talking to games developers, learning about how games are made, understanding the player mentality, and the problems that you might be able to address. As always, finding product:market fit can require a lot of learning and iteration.

    Most of all, ignore the false prophets who were reading from the web3 gospel just a few months ago. They will just ride this trend until something else comes along.

    1. Yes, throughout this article I am drawing a deliberate and passive-aggresive distinction between ‘creating’ and ‘generating’. [↩]
    2. It bothers me that I covered Explorers and Socializers, but didn’t have the time to identify anything for Achievers and Killers. [↩]
    3. And in most mid-large studios there are usually multiple teams running in parallel focused on different projects at different stages of development. [↩]
    4. The irony of a venture capitalist calling the games industry ‘insular’ is not lost on me. [↩]